Simple Forex System Trading

I received an email from my broker regarding the changes in forex trading.  I personally don’t use Hedging as a strategy, but wondered if this change had something to do with the recent economy down turn.

Dear Customers:

Interbank FX, along with all FCM’s, has received information from the NFA that we wanted to pass along to our customers. All registered FCM’s have received a new Compliance Rule 2-43 regarding forex trading. On May 15, 2009, forex customers will no longer be allowed open “hedged” positions in their accounts. Please see an excerpt from the new NFA rule below. If you are currently using Hedging as a trading strategy, we would encourage you to use the Interbank FX Demo accounts over the next month to help modify your trading strategy. Also, for those of you who utilize hedging strategy with your “Expert Advisors”, we would encourage you modify your code and test your advisor on the Interbank FX Demo servers as well. In order to assure a smooth transition for our customers to the new NFA Compliance Rule, Interbank FX has set May 8, 2009 as the last date that customers will be able to Hedge open positions.

I came across this discussion on the Oanda board today about someone’s margin call experience.  Somewhere in the thread, someone mentioned that always use a stop loss and never use the margin call as the stop loss.  I couldn’t agree more.  Don’t let each trade lose more than 2% or 3% of your total investment capital.  Strict money management is king to the successful Forex trading.

Thanks everyone for your kind comments.  I am so glad to hear from you.  I had a spam filter put on the site to filter out spammers’ comments.  Your comments were waiting for me to verify but I somehow overlooked.  I apologized for the delay in responding.

I don’t normally trade British Pound in my daily trading; however, I do have demo accounts set up for a few Pound / Dollar breakout systems.  Over time, what I found was that the pivot breakout systems produce better results than simple breakout systems.  Now, I am using Oanda demo to test, so I do not use trailing stops.  The results are based on very simple set-up with protective stop loss and preset take-profit target.  Stop loss also plays a very important piece in the trading system.  I found that somewhere between 25 and 35 pips of stop loss produced better results in conjunction with the take-profit targets.  The ratio is about 1 to 1.  For example, stop loss 25 pips v.s. take-profit 30 pips, or stop loss 30 pips v.s. take-profit 30 pips.  Not that I meant to change the authors’ original systems, but I was just curious as to what combinations of profit/loss ratio would change the end results.

Again, I invite you to check out these two breakout systems if you are a British Pound / Dollar fan, because I think the creators are brilliant.

Normally, I stick to my trading plan and the two trading strategies I have been using for some time.  They have produced good results.  However, I was bored on one of those days and began to poke around on the web.  Ichimoku caught my attention.  I have never used the Ichimoku indicator before.  So, I decided to read about it and found it absolutely fascinating.  Even though at the very first glance, it did look complicated.  After a few attempts, I began to get the hang of it. 

Here are a couple of web sites that I used to read about Ichimoku:

http://www.fxwords.com/u/ichimoku-cloud.html

http://www.prosticks.com/education/ikh.php

I had my first Ichimoku trade last night.  Bought EUR/JPY and sold it in less than 30 minutes and bagged 20 pips.  I did put a 20-pip stop loss in just in case.

Below is a 5-minute chart with Ichimoku I used last night.

I came across this testing software the other day and downloaded a copy to try it out.  It may not be as fancy as Meta Trader 4 or Trade Station, but it is a godsend for those who don’t know the programming script for Meta Trader or Trade Station.

It is packed with all the indicators that you can ever need to build your strategy, entry and exit points, risk management, etc.  However, I couldn’t get it to work for mine because I somehow was unable to create the rules for stop buy or stop sell only at previous high or low plus or minus 5 pips.  It only allows you to set it at previous high or low.  I might be doing it wrong though.

Nonetheless, take a look, download a copy at Forexsb.com and try it.  I think it’s worth a try.  If you don’t know any programming script, this can be a workaround.